Summary
THE recent negotiations between the Employees' Provision Fund (EPF) and Utama Banking Group (Utama) for a stake in Rashid Hussein (RHB) and the voluntary general offer (VGO) of Amcorp Group (Amcorp) have spurred interest in the local banking sector's merger and acquisition (M&A) scene again. While it's true that Utama recently rejected EPF's offer for RHB, few banking observers believe that the rejection isn't the end of the matter and that other parties may even join in the fray.
There is likely to be more excitement ahead for the whole sector, given the urgency of another round of consolidation in the local banking sector in view of the threat of aggressive foreign banks ahead of the 2008 financial liberalisation of the industry. Rightly or wrongly, foreign banks are perceived to be more effectively managed and bigger and stronger in the eyes of most consumers. As such, how big is the foreign banks' actual threat to their local counterparts and how can the latter respond to their onslaught once the doors are thrown open? We look at these and other issues in this story and how it may be a case of `survival of the fittest' for the smaller banks caught in the onslaught.See the full content of this document
Extract
Banking Signs
LOCAL BANKS ARE DOING WELL THUS FAR, BUT ...
According to Bank Negara Malaysia (BNM)'s annual report, domestic banking institutions controlled 81.7% share of end-CY05 (calendar year)'s gross loans in the local banking industry, which was a slight improvement as opposed to 81.3% as at end-CY04. Their return on equities (ROEs) as a whole also rose rapidly to 15.2% in 2005 from 11.5% in 2004, which could be due mainly to their aggressive capital management during 2005.While the local banks appear to be ready for more competition based on the above fact, the actual story is only unfortunately partially true, says CIMB Research in ...See the full content of this document
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